I would encourage anyone planning to start up a new business to invest some time in creating a Business Plan first. There are many different things you need to consider before starting a business and going through the business planning process is the best way to ensure that you have really thought through everything you need to. A little time up front can save a lot of grief later on and greatly increase the chances of your business being successful.
RELATED: Guide To Writing A Business Plan
Here are my 5 top reasons why you should write a Business Plan.
1. To Show You Are Serious
By writing a Business Plan you are demonstrating that you have properly thought through every aspect of your idea and the plan itself shows exactly how your business will work and why it will be successful. The fact that you can demonstrate through your plan why there will be a demand for your product or service, who your customers will be and why they will buy what you are offering, puts you a big step ahead of someone who just thinks they have a great idea.
This is important if you need to attract investors, partners and even employees and managers to work with you. All of these will need to have good reason to risk their money or their livelihood with you, and your Business Plan can help give them the confidence and assurance they need.
2. To Spell Out How Your Business Finances Will Work
An essential part of your Business Plan will be financial projections. The rest of your plan will ultimately all feed into your projections for income and expenditure during the first years of your business. This will help ensure you (and others) have a clear understanding of where your revenue comes from, what your sales targets will be and any cash flow issues that you need to address.
This work should also show whether any capital investment is required to start the business and identify any times when funding will be required to cover periods of negative cash flow. This information will be vital in attracting any investors or partners. The future viability of your business could depend on being properly prepared in terms of cash flow, as this is what kills many small businesses which are otherwise perfectly profitable and viable.
3. To Ensure You Understand Your Customers and Competition
You may think you have a fantastic idea, but if no-one is interested in buying what you are offering, or if they can get it cheaper or better elsewhere, you don’t have a business. An absolutely crucial part of the business planning process is to identify who your potential customers are and who your competitors are. You then need to be able to clearly show why these people will become your customers. You do this by providing evidence that there is demand for your product and that you can provide something that that will make people choose you instead of your competitors.
You do not know if your business is truly viable until you undertake this work. You also need to show a clear understanding of any trends in your industry or changes in the marketplace. How big is the potential market and is it growing or shrinking?
4. To Spot Potential Problems In Advance
Writing a structured plan forces you to properly challenge any assumptions you have made and can bring to light potential issues that you may not have considered before. By facing up to these things in the planning process, you can identify ways to avoid or deal with them so that they do not become unforeseen problems when your business is up and running.
The flip side of this is that the planning process can also identify new opportunities and whole areas of business that you may not have considered before.
5. To Measure Progress And Keep You On Track
A good Business Plan is something you can refer to when your business is up and running to ensure you are not losing focus or getting side-tracked into areas you had not intended being involved in. By setting out financial targets and key milestones in advance, you can measure your actual performance against these to see how you are progressing.
Your Business Plan spells out exactly what you want to achieve in your business, so referring back to it can help ensure you are focusing your efforts in the right areas.
The Resources section of this site provides a step by step guide to writing a business plan, and other resources for small businesses.